Intel adds refund option to board recall

Intel Corp. has confirmed several more details of the motherboard recall program associated with its flawed memory-translator-hub (MTH) component, including a refund program for third-party vendors.

In addition, Intel, Santa Clara, Calif., lowered its first-quarter earnings by a penny as a result of the recall.

End users who purchased Intel's CC820 or "Cape Cod" motherboard are being asked to return it to the company from which they purchased it, and they will receive a new MTH-less VC820 or "Vancouver" board in return. Purchasers of third-party boards that used the MTH will receive either a cash refund, a credit, or a replacement board.

A spokesman for Intel said that his company was also working with individual OEMs, resellers and motherboard vendors "to find a solution".

Little more than a week ago, Intel suddenly recalled all of the motherboards using the MTH component, an optional addition to the Intel 820 chipset to allow it to access SDRAM. Potential errors included the possibility of data corruption. Less than a million boards were affected, Intel said, but instead of being concentrated within any one supplier or OEM, the boards are also scattered across myriad motherboard makers and "white-box" resellers and assemblers that serve smaller businesses.

Each of the new VC820 boards will contain up to 128 Mbytes of Direct RDRAM, at PC700 speeds or faster. Industry sources told EBN that Intel has purchased up to a million pieces of PC700 Direct RDRAM, although the Intel spokesman declined to comment on how many chips Intel has stockpiled.

For customers of third-party motherboard makers like Asustek Computer Inc., Intel will offer a cash refund in place of replacing the motherboard. The Intel spokesman declined to state about how much of a refund will be offered, but $150 to $200 seems likely, sources said. The single-unit prices of the CC820 and Asus P3C2000, one of the motherboards affected, range between $140 to $170. It was not known whether the refund will include shipping charges.

Asus will discontinue its P3C2000, CUC2000, and CUC2000-M motherboards based upon the Intel 820/MTH combination, and two "riser cards" that allowed SDRAM modules to be used in conjunction with slots designed for Direct Rambus memory modules.

"After intensive testing on a variety of ASUS motherboards with the MTH chip, ASUS only found this problem appeared on very few of the above-mentioned products," Asus said in a statement posted on its web site, www.asustek.com. "Of the few that ASUS found the MTH problem on, ASUS found that this problem depends on the type of memory modules and power supply used."

A representative of Asustek, believed to be Intel's largest Taiwan-based motherboard customer, told EBN a week ago that only 150,000 boards, or 5% of its shipments, would be subject to recall. Samuel Liu, a director at fellow motherboard maker Micro Star International Co., projected that only 2% to 3% of the 500,000 to 700,000 boards the company ships each month would be affected.

Today, Intel lowered its first-quarter earnings by a penny as a result of the recall, adjusting revenue down from $8.02 billion to $7.99 billion. Net income was lowered as well, from $2.73 billion including gains and charges, to $2.70 billion.

"The company also recorded additional inventory reserves related to such [motherboard] products that may be returned and the company's inventory of these products as of the end of the first quarter," Intel said in the filing. "The costs associated with the motherboard replacement program cannot be estimated because the number of motherboards that will be replaced (the user replacement rate) and the actual cost to replace are dependent on several variables that cannot be estimated at this time. The company expects to record a liability for these costs in a future period when the replacement rate and the cost to replace are known or can be estimated, and this liability could have a material adverse impact on the results of operations of the period in which it is recorded."